Conference Paper 6th Meeting of the Society for the Study of Economic Inequality ECINEQ, Université du Luxembourg, Campus Kirchberg, Luxembourg, 13-15 July, 2015
Disentangling annuities and transfers: redistribution in Greek retirement benefits
The objective of this paper is to identify the relative importance of annuities and transfers in Greek retirement benefits and draw conclusions as to their impact on intergenerational and intragenerational equity. As one of the core objectives of a pension system is to redistribute income over the life span of individuals, their equity effects are examined by adopting a longitudinal approach. This approach compares the balance between the net present value of total contributions paid and pensions received by individuals throughout the course of their lives. The difference between the two is the implicit transfer that can be either positive (a transfer received by the rest of society) or negative (a transfer paid to the rest of society). The methodological line of inquiry involves the analysis of a representative sample of retirees from the biggest social insurance fund of the country in 2008. Annuities and transfers were calculated according to the rules that were in place both before and after the major pension reform that took place in Greece in 2010. The impact of the 2010-2013 austerity measures on lifetime pension benefits were also taken into account. Our findings suggest that the vast majority of retirees are receiving positive -and quite substantial, in absolute terms- net transfers from the system. This outcome implies that the underlying pension rules seriously deviate from actuarial fairness and are thus violating the principle of intergenerational equity.